BPI (BRITISH RECORDED MUSIC INDUSTRY) LIMITED

Transcription

1 BPI (BRITISH RECORDED MUSIC INDUSTRY) LIMITED RESPONSE TO DEPARTMENT FOR BUSINESS INNOVATION & SKILLS CONSULTATION ON THE SUPPLY OF GOODS, SERVICES AND DIGITAL CONTENT OCTOBER 2012 Page 1

2 BPI (BRITISH RECORDED MUSIC INDUSTRY) LIMITED RESPONSE TO DEPARTMENT FOR BUSINESS INNOVATION & SKILLS CONSULTATION ON THE SUPPLY OF GOODS, SERVICES AND DIGITAL CONTENT EXECUTIVE SUMMARY BPI (British Recorded Music Industry) Limited ( BPI ) represents the UK recorded music industry. BPI has over 350 members who together hold the copyright in approximately 90% of the sound recordings made available legally in the UK every year. BPI welcomes the ambitions in the Consultation on the Supply of Goods, Services and Digital Content of clarifying consumer law, in particular in relation to digital content. Britain is a digital nation. Millions of users are listening to music on mp3 players, downloading songs from itunes, watching music videos on YouTube, streaming latest releases from Spotify or engaging with other digital content such as films or games online. In addition, devices such as touchscreen smartphones and tablets are creating new ways to consume and sell music or other digital content. It is important that the law accommodates developments in technology, and BPI believes that creating a bespoke digital content category within a Consumer Bill of Rights would achieve this. BPI supports the Consultation s assessment that digital content should be treated differently to goods and services, as it does not fall squarely into either category. BPI believes digital music is regarded as a service for the purposes of the Copyright Directive and the E-Commerce Directive. If the UK Government proposes that it be treated as a sui generis new category, in this context, that must clearly be without prejudice to the fact that digital music is a service for the purposes of the relevant Directives. It follows that the remedies for sub-standard digital content should differ from the remedies available for sub-standard physical goods. The concept of returning digital content is not viable, as digital content cannot be returned to the trader without excluding the possibility that the consumer retains a faulty yet usable copy of the content on their device instead of deleting the content. BPI therefore believes that the remedies of repair and replacement are most applicable to digital content, and that consumers should not be entitled to return digital content or be entitled to a refund. The difficult problem is that in many cases there is no physical outlet the consumer can visit to prove they do not have the digital content on their device, and as such there may be an expectation of redress that is in practice difficult if not impossible to achieve. Even if they could visit a physical outlet that would be of no help as they can make a copy onto a different device than the one they bring in for examination. That said, the research put forward by Which? to the consultation shows that offering refunds is common practice from retailers. However, it should be left to the content provider s discretion and such remedy should not be prescribed by law. BPI would also note that the end-consumer experience and consumer expectations in general will vary depending on the digital content they purchase, and how that digital content is consumed. By way of example, streaming digital musical content through a laptop s speakers will inevitably deliver a different, inferior listening experience to downloading a high-quality copy of a sound recording, or buying a CD and playing this using a home surround sound system. In that environment, what constitutes sub-standard products must recognise these distinctions and must Page 2

3 recognise that such distinctions may be as a result of the distribution mechanism, and not the quality of the original data version as dispatched by the retailer. CONSULTATION QUESTIONS In responding to the Consultation, BPI has answered only those questions that are relevant to its sector. We express no opinion either way on other questions, but would be happy to engage with officials on those questions if it would be of assistance. Q65. Do you agree that we should clarify consumer law for digital content transactions? (7.1-45) BPI agrees that it would be sensible to clarify the law in relation to digital content for consumers. The Sale of Goods Act 1979 and the Supply of Goods and Services Act 1982 (the Current Law ) do not contemplate digital content, and yet apply to digital content, and fine distinctions have been drawn between similar transactions in court, resulting in rights being interpreted in a variety of ways. Given that Member States need to adopt and publish laws, regulations and administrative provisions necessary to comply with the Directive on consumer rights, amending Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights, amending Council Directive 93/13/EEC and Directive 1999/44/EC of the European Parliament and of the Council and repealing Council Directive 85/577/EEC and Directive 97/7/EC of the European Parliament and of the Council (the Consumer Rights Directive ) by 13 December 2013, BPI agrees that this is a good opportunity to modernise consumers legal rights in relation to digital content. However, it is important that this modernisation does not result in more onerous obligations being placed on content providers than those imposed under the Current Law. Q66 Can you provide us with any further evidence of the impact / costs of the current unclear legal framework on business or consumers? ( ) E.g. for business cost of dealing with complaints or dispute resolution? E.g. for consumers any further evidence of consumer detriment? We do not have any further evidence of the impact/costs of the current framework on business or consumers. A large proportion of online music transactions are low value transactions (i.e. 1 or less). The Consultation makes the point that therefore consumers are less likely to complain when they purchase sub-standard music content than when they purchase sub-standard content of a higher value such as online games. We do not believe that the low number of complaints made in relation to music content is a consequence of the law being unclear; but rather because (a) the transactions are of low value, and (b) the technology whereby the majority of music is lawfully consumed is sufficiently mature and robust that most music digital content is simply not of sub-standard quality. We do not predict that a clarification of consumer law will lead to an influx in complaints in relation to music content provided the remedies available are suitable. Q67. Do you think the Consumer Rights Directive is sufficient in itself to address the issues relating from lack of clarity of consumer rights in digital content? ( ) The Consumer Rights Directive is helpful in that it defines digital content and the ways it can be consumed. BPI agrees with Consumer Rights Directive Recital 19, that contracts for digital content which is not supplied on a tangible medium should be classified, for the purpose of this Directive, neither as sales contracts nor as service contracts. The information requirements set out in Article 6, and provisions in relation to the right of withdrawal are also helpful. However, BPI believes that Page 3

4 the Consumer Rights Directive is insufficient to address the issues surrounding the lack of clarity of consumer rights in digital content. The Consumer Rights Directive does not set out any consumers rights regarding the quality of digital content and will therefore not assist in clarifying the Current Law regarding implied terms in transactions involving digital content, which BPI agrees can be confusing for consumers. BPI agrees that it is sensible to use the Consumer Rights Directive definition of digital content as the definition in the Consumer Bill of Rights. Q68. Do you think that digital content supplied on a tangible medium such as a disk should be covered by the same set of digital content quality rights and remedies as intangible digital content, such as downloads? ( ) It is confusing for consumers that under the Current Law a disk containing a sound recording is perceived as goods, whereas when the same sound recording is streamed or downloaded it is not clear whether this is a good or service. The position is the same in the Consumer Rights Directive, save that it states that digital content which is not supplied on a tangible medium should be classified as neither sales nor services contracts under the Consumer Rights Directive. BPI believes that if a consumer buys music on a physical carrier, or downloads the same album the same set of digital content quality rights should apply, but the available remedies should be different. By way of example, the BPI Classical Music Consumer Research carried out in August 2011 surveyed non-digital consumers and 35% said they did not download digital content because they did not think the sound quality was good enough. Currently the CD is of higher quality than digital download services, and this is transparent to the consumer. It should be a commercial decision as to whether digital services choose to market at CD quality and this should not be a regulatory issue for Government. Q69. Do you think reasonable consumer expectations as to quality would differ between digital content that is transferred to a consumer s device and digital content that is held on a 3rd party server? ( ) Content that is streamed from a 3 rd party server may not be of the same quality as digital content that is transferred to a consumer s device. Many download services do offer mp3 downloads at 320 kbps (described as near CD quality ), Spotify, for example, also offers subscribers streaming rates of 320 kbps, and other premium services are moving to match this. In addition, streaming content will be influenced by a variety of outside factors such as the consumers broadband speed, the quality of the consumers hardware etc. When digital content is transferred to a consumer s device their broadband speed is no longer relevant. As set out in our answer to Q68, the better the consumers sound system, the better their overall experience will be. The levels of what constitutes sub-standard quality needs to reflect the varying quality of digital download services. Otherwise, there is a danger that Government would be defining what products digital music services should sell. In that respect, it is also entirely reasonable for there to be product differentiation e.g. CD, SACD, MP3, or as in TV, TV HD and standard definition. Q70. Do you agree that we should align our proposals for digital content as far as possible with the existing consumer rights framework? ( ) Q71. Do you agree that digital content should be treated as a separate and bespoke category within the Consumer Bill of Rights? (7.86) BPI agrees that the proposals for digital content should be aligned as far as possible with the existing consumer rights framework, but nonetheless that digital content should be treated as a bespoke category Page 4

5 within the Consumer Bill of Rights. The framework in relation to goods is currently more applicable to digital content than the framework in relation to services. However, digital content is increasingly provided via streaming services and under subscription models, and as such it is important to recognise that the recorded music industry is moving towards a services based model. Creating a bespoke category of digital content within the Consumer Bill of Rights is the easiest way of dealing with this trend. Q72. Do you agree with the principles we have based our digital content proposals on? In particular do you agree that related services and enabling services could be distinct from digital content and from each other? ( ) BPI agrees that the quality standards identified in the Consultation will clarify the standard that digital content should meet, and do not appear to depart significantly from the Current Law in relation to goods. Enabling services i.e. broadband and internet service provision services are distinct from digital content and should not be treated as digital content. BPI agrees that enabling services should therefore be treated as services, and that consumers should be entitled to the remedies that apply to services when these are not provided with reasonable care and skill. In relation to related services, whether such services could be distinct from digital content will depend on the type of digital content. In our experience, for music, related services are always offered by the supplier of the digital content itself and are intrinsic to the content product e.g. streaming a song via Deezer, or downloading a song through Amazon mp3. In our experience BPI has not come across a situation where a song is not provided to the consumer by the same supplier as the supplier of the underlying content itself. Q73. Do you agree that the provisions as to passing of limited title work for digital content? (7.98) The provisions in the Consultation relating to passing of limited title do not work for musical digital content, as it does not align with copyright and current business practice. The current wording: copyright of the digital content does not usually pass to the consumer does not accurately describe the relationship between the trader and the consumer. It is more accurate to say that copyright in digital content does not pass to the consumer under any circumstances. A consumer may be permitted to do certain acts without infringing the copyright of the copyright owner but the copyright remains with the owner and does not pass to the consumer. Giving the consumer a right to certain limited copies does not give them any ownership of the copyright in the sound recording itself. We would prefer that this is made clear in the Consumer Bill of Rights. In addition, in relation to most musical digital content, the phrasing of rights to title will be inappropriate. A seller can only transfer such title that they have the right to transfer. It would be more appropriate therefore to refer to transfer of rights instead. The Consultation states that where a consumer has purchased and used digital content that the retailer did not have the right to sell (i.e. material in breach of copyright), the consumer is using the digital content in breach of copyright. BPI agrees with that proposition. The Consultation acknowledges that the consumer may be innocent or complicit in such a case this is inappropriate as breach of copyright is a matter of strict liability - but that in either scenario the consumer should be entitled to a remedy under consumer law (reimbursement in full for any payment they had made to the retailer) from the retailer. BPI disagrees with this proposition. It is difficult if not impossible to prove that a consumer does not retain a digital copy of the infringing item even if the consumer him/herself believes it to be deleted. It is important that it is explicitly set out in the Consumer Bill of Rights that under copyright law the ultimate rights holder has a remedy against the trader and the consumer for copyright infringement. Page 5

6 Q74. Do you think that consumers should be asked to consent to any interference that could affect their use of the digital content? What impact would such a requirement have on businesses supplying necessary updates or otherwise needing to manage the digital content post-purchase? ( ) BPI believes that so far as digital music consumption is concerned changes to content are highly unlikely, and changes to services that provide content are more appropriately dealt with in the terms and conditions of such platforms as opposed to a general qualification in the law. Q75. Should we remove the freedom from minor defects aspect of quality (s.14(2b)(c) of SOGA) specifically and only for digital content? Should we do so for certain types of digital content, if so which? (7.111) In the mature digital music market legitimate sound recordings are almost entirely defect-free. However, BPI acknowledges that even a quantitatively small problem could be seen as a major problem in a single music file - i.e. a 1 second glitch in a 3 minute track may render the digital content of unsatisfactory quality, and therefore we would not object to freedom from minor defects remaining an aspect of quality applicable to music files, provided minor defects could be assessed reasonably, and refund was not an available remedy. Q76. Should we clarify that the safety aspect of quality (s.14(2b)(d) of SOGA) means the safety of a computer or other device used to access digital content as well as personal / physical safety? (7.112) BPI agrees that a reasonable person would expect not only that digital content would not cause personal harm but also that it would not cause damage to their other possessions such as computer software or hardware. The safety definition should therefore be broad enough to capture this. However, BPI notes that when consumers purchase or download content from unauthorised or illegal sites, i.e. pirated content, it is highly possible that this content could either damage the computer software or corrupt the rest of a collection or other tracks. We would like to see consumers made aware of this. In this aspect, Government might take a more active role in educating consumers about the differentiation between legal and illegal content online, the potential for problems caused by downloading illegal material and the lack of consumer redress in respect of illegal material. Q77. Do you agree that we do not need an express statement on durability in respect of new versions as the European Commission have proposed for CESL? (7.113) BPI agrees that it is unnecessary to have an express statement on durability in respect of new versions. Q78. Do you think that these rights to quality are broadly appropriate for digital content? (Box 32) Yes, subject to the amendments that BPI has proposed in our response. Q79. Do you think these are suitable remedies for cases where sub-standard digital content has been supplied? (7.115) BPI strongly favours Option 1, i.e. the trader has to offer either a repair or replacement in the first instance, and if this does not fix the problem, the consumer can ask for a price reduction or refund. This means that a short term right to reject is not necessary. In addition, BPI believes that for music content, the ability to listen and sample tracks before buying is widespread, and the only issue at hand is whether the content, once acquired, is sub-standard and replacement is the appropriate remedy. Page 6

7 In addition, it is important to note that the first tier remedy is repair OR replacement, and that it is up to the trader to decide which option is most suitable on a case by case basis. In relation to music, it is much easier and cheaper to replace than to repair a file that is of sub-standard quality. The second tier remedy i.e. a right to refund is generally not applicable to music, as digital content can always be repaired or, more commonly, replaced where it is of sub-standard quality. A consumer should not be entitled to ask for a refund if they downloaded the wrong song - unless the song had been mis-labelled by the trader. Given that it is not possible in most circumstances for a consumer to prove that they have discarded a track they wish to have recompense for, it is best left to the discretion of retailers to allow refunds rather than create expectations amongst consumers that they will be able to benefit from a refund which is in practice extremely unlikely. In our experience, and this is supported by the survey conducted by Which? referred to in the Consultation, most reputable retailers do offer a refund for digital content. However, BPI believes that it should be in their discretion to do so, and that it should not be included in the law as an obligation imposed on digital service providers. Q81. Would our proposals impact on the likelihood of your business providing updates to digital content? ( ) The music industry is different to other digital content providers such as the games industry in that there are generally not updates to digital music. An updated sound recording would be a new sound recording, which would need to be downloaded and paid for separately. In our experience the only time where updates would apply in relation to digital music content would be where updates are made to a platform i.e. Spotify or itunes which would not normally have an impact on the digital content itself. Q86. Do you think there should be the equivalent of a short term right to reject for digital content? ( ) Q87. To a) avoid confusion around the fact that the digital content will not actually be returned but deleted and b) more clearly differentiate between the right to reject and the right to withdraw, would the right be better expressed as a right to an immediate refund for faulty digital content with an obligation to delete the digital content? ( ) Q88. What impacts would a right to reject have on retailers of digital content or on rights holders? ( ) A short term right to reject is inappropriate for digital music content, as digital content cannot be returned but must be deleted from a consumer s device(s) where it is rejected or where the contract is rescinded. It is virtually impossible to ensure that a consumer deletes the faulty content from their device, and it is possible that consumers could report that digital content is faulty yet retain a faulty but usable copy on their device. BPI agrees that digital content providers could develop tools to prevent a consumer from continuing to use digital content i.e. deleting content remotely or introducing access pins, however these would be difficult and costly to enforce in practice. Even if there was a legal requirement that the consumer removes content this is difficult to enforce and verify (especially for open platforms) and the consumer could lack the technical expertise to do so. In addition, BPI agrees with the against the right to reject section of the Consultation, in relation to issues between a content trader and a rights holder that could ensue if a right to reject was included. Furthermore any attempt to return the digital Page 7

8 content to the trader could result in another copy of digital content. The first tier remedy of repair/replacement is therefore preferable. In relation to the right of withdrawal, the Consumer Rights Directive acknowledges that there will be an exception from the right of withdrawal in relation to the supply of digital content which is not supplied on a tangible medium if the performance has begun with the consumer s prior express consent and his acknowledgement that he thereby loses his right of withdrawal. In our experience, most diligent digital content providers would require this express consent and acknowledgement from consumers and therefore Q87 is not of relevance for music i.e. there would not be a right to reject or a right to withdraw for digital content. Q89. Do you think the provider of a related service should have responsibility for ensuring that the digital content is of a satisfactory quality once the related service has been performed? Please explain why. ( ) See our response to Q72. Q90. Could you describe the impact that applying digital content quality standards to related services would have? ( ) See our response to Q72. Q91. Do you agree that internet service provision should remain completely outside whatever new consumer protection mechanism is set up for consumers of digital content and related services? ( ) See our response to Q72. Internet service provision should be treated as a pure service and be covered by the remedies for services when it is not provided with reasonable care and skill. Q92. Do you think the concepts of repairing, replacing, reducing the price or terminating the related service will work in practice? ( ) See our response to Q72. Q94. Which of these remedies do you think consumers would be most likely to find satisfactory? ( ) It would be most beneficial for consumers if they had access to the same remedies for faulty related services as they enjoy for faulty digital content. Q95. What kind of evidence could a consumer provide to show that the digital content did not comply with quality standards and that the fault was inherent? What evidence would digital content traders consider as sufficient to show that they would need to provide a remedy? ( ) See our response to Q88. It is almost impossible to prove from a consumer perspective that the digital content they purchased did not comply with quality standards and that the fault was inherent. The consumer would have to notify the digital content trader of the fault and the trader could then check Page 8

9 their own system once notified i.e. an error report would enable the trader to ascertain whether the fault was with the product itself or with enabling/related services. Q96. Which option do you prefer? If you could mix and match the options, is there a preferable combination of proposals, especially those relating to the right to reject and the treatment of related services? (7.165 & Table 9) BPI prefers Option 1, subject to the comments already made in our response. Q97. Do you agree with the above analysis of the costs and benefits of our proposals? Is there anything we ve missed? ( ) See our response to Q66. Q98. Do you think that consumers should have the right to digital content meeting a certain quality even if they do not pay money for it? ( ) Q99 Do you think that consumers should only have remedies if digital content has been paid for with money? ( ) Or should the rights apply but we expect consumer expectations to be lower because it was free? Or should we provide for limited remedies if the digital content was provided for free? Consumers should have the right to expect that free legal content meets basic quality standards i.e. is free from bugs. ADDITIONAL COMMENTS The Consultation overlooks one of the key characteristics of the Internet environment and digital content: the superabundance of available illegal content. Hundreds of millions of illegal copies of copyright content are being made available to consumers for free in clear breach of copyright law and the right of European creators to be paid for their work. BPI works both in the UK and internationally with sister organisations to address this issue head on. This involves educating consumers about the damage copyright infringement causes. As mentioned in our response to questions above, sub-standard digital content is an issue in relation to illegal (i.e. pirated) copies of content. By way of example, a study carried out by Harris Interactive indicates that 79% of users encountered problems as a result of acquiring music from a P2P network, 59% downloaded poor quality recordings, 51% downloaded songs which were different to what they wanted (i.e. wrongly labelled tracks), 41% downloaded spyware and 39% downloaded a virus or Trojan. BPI therefore thinks it is of prime importance that the Government considers a more active role in educating consumers by guiding them towards legal content and explaining the pitfalls of using illegal services. BPI understands that the current proposal is to guide consumers towards traders of legal digital content, and initiate a communications campaign after consumer law has been revised. BPI thinks that it is imperative that that the Consultation and the ensuing Consumer Bill of Rights considers education and piracy simultaneously with considering the quality of digital content, instead of considering the quality of digital content in isolation. Page 9

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